Public Service: Mutually Assured Destruction?

When I was a Trostkyist, back before the last Ice Age, one of our favorite slogans was “workers control”. It is therefore somewhat weird to hear Tory and Liberal Democrat ministers extolling the virtues of ‘liberating the workers’ to run public services, and how they will improve as a result. The new White Paper on ‘Open Public Services’ confirms them in this approach.

Of course, they don’t go quite so far as to call it workers control – if they did the comrades who used to run the Institute for Workers Control would probably rise from the grave in protest. No, the language of the day is ‘mutuals’.

Strictly speaking, mutuals is probably the wrong word. There are generally two sorts of cooperatives – workers coops (like John Lewis) and customer coops (like THE Cooperative). Mutuals used to be the term applied to the latter rather than the former, and we used to have a lot of them. They were called Building Societies and some were pretty Big Societies at that. They were transformed in the other direction, from mutuals into commercial entities, under the policies of the last Tory government. It would of course be pure speculation to suggest this is the route the new public service mutuals could follow.

Clearly the ‘New Mutuals’ idea is something different to the old. They, Building Societies, were fulfilling a public-private purpose (housing) but not directly funded by the state, and they were consumer coops. The idea that tax-funded, legally mandated, public services should be provided by worker-run cooperatives is a new one.

It is reported that the working group looking at this, involving LSE professor Julian Le Grand, has an unofficial target of 1 million public sector staff working in mutuals (about one in six of the total). This would be an amazing transformation if it happened, and would I think be fairly unique in the developed world. No one really knows what the dynamics of such a transformation would lead to.

It might seem desirable to transform a particular public service organisation into a mutual with a contract to deliver services. The argument that ‘liberated’ or ‘self-organised’ workers are likely to be more enthusiastic and innovative has some merit. There is evidence from some private sector organisations that have adopted more ‘collaborative’ structures that this can be the case.

I can even see why some trade unionists might see the idea as attractive. When I was a trade union official in the then nationalised British Telecom back in the early 1980s many of my fellow officials, and workers, understood the business far better than the managers. The temptation to want to run things for ourselves was always there, and in some respects we did under the old “Whitley” style industrial relations set-up.

However, the hurdles to the New Mutuals are formidable and the possible dynamics hazardous. First of all, many public sector workers will be suspicious, if not fearful, that this all just privatisation by another route. And moreover one by which their employment rights might be evaded.

The biggest problem however is the problem of competition. Whilst it sounds very romantic to transform existing organisations into mutuals, the dynamics of the ‘what happens next’ question get tends to get ignored.

It might just be possible to contract mutuals to provide services without competition in the first instance, although even at that stage there are legal hurdles about competition rules to overcome.

But thereafter mutuals will inevitably have to submit to periodic competition for contracts from other not-for-profits, including other mutuals like themselves, and, crucially, for profit organisations. The White Paper’s “diversity of provision” principle makes this clear.

There are two reasons for this. First, if they were not then they would have a monopoly on provision which really would be ‘producer capture’. Second, domestic and EU competition rules will almost certainly mean mutuals will have to compete for business.

And then what happens? We know, for example, that large private sector organisations are get at getting business by ‘loss leader’ bids that eliminate rivals. The have been ample, well documented, examples of this during the ‘compulsory competitive tendering’ and ‘competing for quality’ initiatives of the 1980s and 90s – not mention transport and other regulated markets.

Other forms of cooperative, like THE Coop, have survived in the Market only by merging. There used to be dozens of Coops, now there is one. Why? Because small Coops found it hard to compete with the large multiples (Tesco and Co) and because they found it difficult to get capital from capitalists lenders, so they had to merge.

So the question will be not whether mutuals can be created, but how long will they last, and in what form? The evidence of capitalist economies over the past century has been of a steady decline in cooperative organisations. Some have persisted – like John Lewis and the Coop – but many have found competing with for-profit capitalist organisations an unequal fight. Of those that have survived they tend to have either merged into very large organisations themselves, which despite their cooperative origins start to look more like any other large, hierarchical organisation. Or they have retreated into small very small niche.

If this dynamic were repeated for worker-controlled public service mutuals this would turn into merely a circuitous route to privatisation or a form of corporatisation that looked very much the same. Some might survive, but the trend would much more likely be to their losing out to commercial competitors over time, or morphing into something that looked and felt more or less the same anyway.

There may well be a role for greater ‘worker control’ in public services delivery, but this cannot usurp the right of those who pay for those services, and their representatives, to exercise some control too. Nor can it ignore the users of their services. So a genuinely innovative new form of organisation would have to incorporate the public owners, workers and users of public services in their running. Only then could it be legitimately protected from unfair competition and draw on the genuine ingenuity of it’s staff to innovate better services. That can be done within fully publicly owned organisations. That would be a genuine Big Society.

But it is not a solution that appeals to the ideologues behind the ‘Open Public Services’ because it would still be state ownership. Despite their rhetoric about not being ideological, ‘workers ownership’ appeals to them merely because it is not public ownership – anything but the state is their clear position.

Great post Colin and agree completely re the naive vs disingenuous points in your piece and the previous poster’s comments.
If the Govt proposed putting carpet bagger restrictions in the articles (or whatever) of the newCos then that would offset some of my scepticism….a tad! Other thoughts on how these niche organisations would compete against large organisations is also needed, as you say.

[…] force of competition and the strictures of competition law. As Colin Talbot noted on his blog post Public Service: Mutually assured destruction on Friday, if we look at the history of mutuals in Britain we see that even where they are […]

It looks like the new Tory government has something in common with our Danish “tory” government: The preference for ill-considered reforms on a weak data basis. (It is like the revenge of postmodernism: “If everything is an intellectual construction, we need not be concerned with the reality when we make reforms!”)

The Danish government has launched numerous reforms (university, high school, local government, police, courts, etc. etc). All of them have more or less been a failure. My suggestion is that we adopt a post-postmodernistic definition of a reform: A large public initiative that will fail.;-)